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Investment Decisions in a New Mixed Market

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  • Kazuhiro Ohnishi

    (Osaka University and Institute for Basic Economic Science)

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    Abstract

    The analysis in Fudenberg and Tirole (1983) discusses the perfect equilibria of a continuous-time model of the strategic investment decisions of two profitmaximizing private firms in a new market and suggests that there are perfect equilibria where each firm does not invest to its steady-state reaction curve. This paper examines the perfect equilibria of a continuous-time model of the strategic investment decisions of a social-welfare-maximizing public firm and a profit-maximizing private firm in a new market and shows that there are no perfect equilibria where each firm does not invest to its steady-state reaction curve in the mixed model.

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    Bibliographic Info

    Article provided by Society for AEF in its journal Annals of Economics and Finance.

    Volume (Year): 7 (2006)
    Issue (Month): 2 (November)
    Pages: 271-281

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    Handle: RePEc:cuf:journl:y:2006:v:7:i:2:p:271-281

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    Related research

    Keywords: Continuous-time model; Investment decision; New mixed market;

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    1. Fershtman, Chaim, 1990. "The Interdependence between Ownership Status and Market Structure: The Case of Privatization," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 57(227), pages 319-28, August.
    2. Poyago-Theotoky, Joanna, 1998. "R&D Competition in a Mixed Duopoly under Uncertainty and Easy Imitation," Journal of Comparative Economics, Elsevier, vol. 26(3), pages 415-428, September.
    3. Pal, Debashis, 1998. "Endogenous timing in a mixed oligopoly," Economics Letters, Elsevier, Elsevier, vol. 61(2), pages 181-185, November.
    4. Basu, Kaushik & Singh, Nirvikar, 1985. "Commitment and entry-deterrence in a model of duopoly," Economics Letters, Elsevier, Elsevier, vol. 18(2-3), pages 265-269.
    5. Wenders, John T, 1971. "Excess Capacity as a Barrier to Entry," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 20(1), pages 14-19, November.
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    7. Lorenz NETT, 1993. "Mixed Oligopoly With Homogeneous Goods," Annals of Public and Cooperative Economics, Wiley Blackwell, Wiley Blackwell, vol. 64(3), pages 367-393, 07.
    8. A. Michael Spence, 1979. "Investment Strategy and Growth in a New Market," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 10(1), pages 1-19, Spring.
    9. Fudenberg, Drew & Tirole, Jean, 1983. "Capital as a commitment: Strategic investment to deter mobility," Journal of Economic Theory, Elsevier, Elsevier, vol. 31(2), pages 227-250, December.
    10. Mujumdar, Sudesh & Pal, Debashis, 1998. "Effects of indirect taxation in a mixed oligopoly," Economics Letters, Elsevier, Elsevier, vol. 58(2), pages 199-204, February.
    11. Ohnishi, Kazuhiro, 2002. "On the Effectiveness of the Lifetime-Employment-Contract Policy," Manchester School, University of Manchester, University of Manchester, vol. 70(6), pages 812-21, December.
    12. Ware, Roger, 1984. "Sunk Costs and Strategic Commitment: A Proposed Three-Stage Equilibrium," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 94(374), pages 370-78, June.
    13. Cremer, H. & Marchand, M. & Thisse, J.-F., 1987. "The public firm as an instrument for regulating an oligopolistic market," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1987010, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    14. Ohnishi, Kazuhiro, 2001. "Lifetime Employment Contract and Strategic Entry Deterrence: Cournot and Bertrand," Australian Economic Papers, Wiley Blackwell, Wiley Blackwell, vol. 40(1), pages 30-43, March.
    15. Toshihiro Matsumura, 2003. "Endogenous Role in Mixed Markets: A Two-Production-Period Model," Southern Economic Journal, Southern Economic Association, Southern Economic Association, vol. 70(2), pages 403-413, October.
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